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Qualcomm declares 24 percent drop in profits

Qualcomm saw its earnings fall 24 percent YoY in the most recent quarter, as sales of high-end smartphones continue to slow.

Published onJanuary 28, 2016

qualcomm logo mwc 2015 c 1

Companies are busy trotting out last quarter’s financial figures this week and Qualcomm saw its net earnings fall by 24 percent in the last quarter, rounding off a less than ideal year for the mobile processor designer.

A closer look at the figures reveals that revenue fell by 19 percent from $7.1 billion to $5.8 billion over the year, which pushed the company’s net income down from $2 billion to $1.5 billion a year earlier. However, Qualcomm stresses that these results actually exceeded expectations and that the company is on track with its cost saving initiatives for this year. Both chip shipments and profits have improved over the previous quarter.

“We delivered a stronger than expected quarter with earnings per share above the high end of our initial estimates, driven by better than expected 3G/4G reported device sales and benefits realized from cost actions” – Steve Mollenkopf, CEO of Qualcomm

Although global smartphone sales are still increasing, last year saw Qualcomm lose a major customer in Samsung, which opted to use its own Exynos chip in its Galaxy S6 range. Qualcomm seems to be having a tough time with the stagnating sales of high-end smartphones. In the mid and lower tiers, MediaTek has also been staking out its share of the market, although China seems to have been a strong region for Qualcomm.

Overall, the company has seen chip shipments fall from the previous year and projections have been revised as a result. Shipments for Q2 are estimated at 175 million to 195 million this year, down 25 percent from the 233 million reported a year earlier. However, the Snapdragon 820, which will appear in this year’s flagship handsets, is apparently already seeing strong demand, with 100 devices in development that will be using the processor.

The Qualcomm Snapdragon 820 will be made by... Samsung

Although the company’s SoC sales are important, Qualcomm also sees a large portion of its income from royalties. The previous year has seen a number of antitrust suites brought against the company, in China, South Korea, Taiwan, Europe and the US. Although Qualcomm insists that it has not breached any laws. LG Electronics also believes that it has paid too much under its patent licensing deal and is now seeking compensation.

Qualcomm still remains a highly profitable business, but the company seems bound to the fate of the high-end smartphone market, which isn’t quite the healthy marketplace that it was a couple of years ago.